Energy Systems Consulting Perspectives

Energy Systems Consulting Perspectives

What’s in Store with the Battery Revolution

While renewable energy and nuclear power often grab the headlines regarding the current electricity markets transformations, leaders across the industry recognize that electricity storage is the real game changer driving revolutionary change. While an increasingly decarbonized energy mix is oft the focus, smart money is on battery technologies being the key aspect to disrupt grids across the world.

As a basic concept, energy storage has been utilized for centuries, most often in the form of controlled hydropower with dams controlling the flow of water used to generate power. Even today, pumped hydropower (where excess power is used to bring water to higher elevations only to be released downstream to generate hydropower when demand rises) is the storage technology with the highest capacity. While such solutions were elegant and ingenious in early energy systems, the modern electric grid necessitates more efficient, timely, and affordable storage to moderate power markets.

Uses of Electricity Storage

When most people hear of energy storage and battery technology, the Energizer Bunny likely comes to mind. Batteries are also increasingly gaining steam and attention regarding the pending electric vehicle boom. While these applications are themselves critical, battery technology for larger-scale electricity storage for the power grid is expected to provide unprecedented market disruption.

For electric utilities, energy storage represents a uniquely two-fold application: dispatchable demand to absorb excess energy generation when supply exceeds demand and dispatchable supply to release stored energy during peak hours when generation is lower than demand. These aspects are of particular necessity to renewable energy, such as solar and wind, which are notoriously intermittent. This variability is a chief inherent weakness of renewable sources, as modern life requires power to be available the moment it’s needed. Baseload resources like coal, natural gas, and nuclear power are able to provide energy at all hours of the day, but a grid that relies solely on solar or wind would be left in the dark when the sun didn’t shine or the wind didn’t blow. Electricity storage is the key to those energy sources’ future, as they enable renewables to produce at maximum capacity whenever possible and for the resultant electricity to be released into the grid whenever the demand requires it—even shifting to the most profitable evening hours, the inability to do so having long been a disadvantage of renewable resources.

Typically, such implementation of energy storage technology has been limited, with the available capacity only enough to cover for hour-by-hour, or sometimes just minute-by-minute, shifts in demand. But recent developments in the technology have started to move the needle in a significant way, enough that some analysts now see solar as not far from being fully competitive with the traditional stalwarts of baseload generation. But long-duration electricity storage is the key that will unleash renewable energy to compete on a baseload scale. Without such flexibility, renewables as a main energy source will remain a pipedream and be subject to curtailment and other inefficiencies. With energy storage, though, the profile of utility-scale energy is due for a revolution.

In addition to the main uses at a utility scale, battery technologies are also making waves in some other niche applications. In the residential and commercial sectors, buildings with on-site electricity generation installations (largely rooftop solar) are increasingly being paired with energy storage so the power generated during sunny hours can be used at all hours of the day and night—helping to solve the so-called “duck” issue. Further, wide-scale electric vehicle usage will present new challenges for utilities by creating potentially massive demand during peak charging hours, but they also present an opportunity for clever uses with batteries, such as utilizing the nation’s electric car fleet as mobile energy storage for the grid.

Reasons for Excitement

To fulfill all these promising innovative uses for electricity storage, battery technology needs to scale quickly. Despite that daunting challenge, the technology and market developments present many reasons for optimism:

Declining costs: Despite the current shortage in battery production (discussed later), expansion in global production capacity --particularly in China-- is expected to continue to push prices lower and make storage as an energy strategy more plausible. Numerous reports forecast that utility-scale battery systems will only continue to drop in price as production scales up and more manufacturers overcome the learning curve. According to Bloomberg New Energy Finance (NEF), for example, batteries are expected to fall from $700 per kilowatthour (kWh) in 2016 to less than $300/kWh by 2030.

Increased adoption: Partly as a result of those decreasing costs, adoption of electricity storage technologies has experienced vast growth—with that growth expected to increase exponentially (doubling six different times through 2030, according to that same Bloomberg NEF report). Projects in Australia and Germany specifically have demonstrated to the world how storage can be integrated widely into the electric power sector and even demonstrate new revenue streams. Within the United States, solar-plus-storage projects in Colorado and Nevada have signed contracts to flex the muscle of storage-aided renewable projects. Further, not only is energy storage increasing in global capacity for utility-scale applications, but U.S. residential and commercial sector energy storage actually grew by more than utility-scale storage for the first time in the second quarter of 2018.

New technologies, such as ARPA-E’s R&D into electrolyzed hydrogen, thermal storage, and liquid flow batteries.

Roadblocks

The pathway forward for electricity storage on a global scale is not without speedbumps along the way, though. Some of the current hold ups in the field of batteries include the following:

Shortage of minerals: Numerous materials required for emerging battery technologies (both utility-scale storage as well as the rapidly increasing electric vehicle battery market) are uncommon—lithium, cobalt, nickel, and other rare earth metals. Not only does the mining of such materials require extensive resources, but some concern has arisen about the environmental impact of such efforts as well as vulnerability of workers in these areas to being exploited (such as the Democratic Republic of Congo). These aspects of battery technology must be given careful consideration as production ramps up.

Production limits: Should the materials all be available in a responsible manner, production has still been a bottleneck as the market grows. While excitement and demand for energy storage is at an all-time high (particularly in North America, Europe, and Asia), pure production has been unable to keep up. Bloomberg NEF reports that precise data on the world’s supply is difficult to gather, but “close observers of the industry have noticed evidence of the shortfall…the supply is struggling to keep up.”

Uneven distribution of supply: Compounding the issue of production falling short of demand is the fact that production is not spread evenly across markets. For example, South Korea is home to more battery manufacturing than anywhere else in the world, but the South Korean government has offered such appealing discounts on electricity rates for businesses that utilize energy storage that most of the manufactured batteries never leave the nation. Similarly, Tesla is the largest and most well-known battery maker in the United States, but due to tight market conditions they are afforded the luxury to be selective with whom they deliver their products. The result is that energy storage technology does not naturally end up where it’s most needed, and production would need to scale up in a huge way to overcome those challenges.

For revolutionary energy transition predictions to come to fruition, electricity storage is a key cog and the technology will need to continue to grow at an accelerating rate. Despite the current roadblocks, enthusiasm, innovation, and government support are all widespread, so batteries are poised to shape the future of the energy industry.

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